What happened

Shares of Tuya (TUYA 1.18%) were tumbling 11% in morning trading Thursday after the Internet-of-Things platform reported second-quarter earnings. Guidance for the third quarter fell well short of what Wall Street was expecting.

So what

While revenue outpaced analyst forecasts and net losses were in line, sales guidance of between $83 million and $86 million missed third quarter consensus expectations of $93.4 million.

Yet Tuya stock has been falling hard for the past week, with shares down 34% over the past five trading days. Tuya went public in March at $21 per share, above the expected $17 to $20 per share range, but after rising almost 20% on its first day of trading, the stock today is going for less than half its offer price.

A cityscape with a digital network superimposed.

Image source: Getty Images

Now what

While Tuya has global customers, as a Chinese stock it is suffering from a slowing Chinese economy and public pronouncements by the government that suggest it wants rein in the success executives have enjoyed from embracing capitalism, such as limits on executive pay. 

Beijing is also intent on exerting even greater control over the internet in China and is planning on further regulation of the sector. Although that has largely entailed limiting what Chinese citizens can see and say online, investors are being warned controls could become much more stringent.

As a business that connects devices to the internet, Tuya might see a significant slowdown in growth for the future.